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Economy

Cypriot president pitches bank levy as 'least painful' option

The Cypriot president has addressed his nation to explain an unpopular levy on citizens’ bank deposits under the terms of an EU bailout agreement. President Nicos Anastasiades said it was the "least painful" option.

Anastasiades spoke on Sunday evening, hours after the Cypriot parliament postponed a debate on a new levy on bank deposits, a measure that Cyprus had agreed with Brussels so it could secure a bailout from the European Union.

The president said that, without the levy on private depositors' savings, the country would have faced the more damaging prospect of defaulting on its debts.

"The solution we concluded, is not what we wanted, but it is the least painful under the circumstances," Anastasiades said.

Under the bailout terms, investors with deposits of more than 100,000 euros ($130,000) are to be slapped with a 9.9 percent charge, while those with savings below the threshold would pay 6.75 percent.

Call for political unity

The president, who urged all political parties to agree to the reform, vowed that he would fight to have the terms of the agreement amended so that the levy did not include individuals with relatively small deposits.

"I fully share the unhappiness caused by a difficult and onerous decision. That's why I continue to fight with the eurogroup to amend their decisions in the coming hours to limit the impact on small depositors," said Anastasiades.

Eurozone finance ministers have demanded the levy in return for a 10-billion-euro aid package. The measure must be approved on Monday by the country’s parliament, before banks reopen, with fears of a run on accounts. However, the plans have enraged many Cypriot politicians.

The tax is expected to raise 5.8 billion euros, which would be used to recapitalize the country’s banks and service the national debt. Some 4.5 billion euros were lost by Cypriot investors when debt on Greek government bonds was written down by eurozone leaders last year. The country’s banks were also exposed to bad debts because of their close links to struggling Greek financial institutions.